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Kerala floods to have limited impact on strength of rated non-life insurers

Nov 09, 2018

Flooding in the southern Indian state of Kerala is not expected to have a significant impact on the balance sheet strength of rated Indian non-life insurers, says A.M. Best.
However, the losses may add to the unfavourable underwriting performance that the international credit agency has flagged as a negative rating factor for some of these insurers, says a new Best’s Briefing, titled, “Kerala Floods: Limited Impact on Rated Insurers’ Capital, May Add to Performance Issues”.
A.M. Best notes that Kerala represents a significantly smaller portion of the Indian non-life market and the international credit agency rated insurers’ overall gross premiums. Additionally, insurance penetration in India is low and insurance penetration in Kerala is estimated to be below the national average.
The cumulative rainfall this year during the 2018 summer monsoon period in Kerala was significantly higher than normal, and together with the release of waters from dams, created severe flooding in the region.
A.M. Best expects fire and motor to be the most impacted lines of business. Motor own damage is one of the leading sources of business, accounting for 30% of gross premiums in the state. Four large insurers, which wrote an estimated 70% of Kerala’s gross non-life premiums in 2017, are likely to absorb the majority of claims. The affected insurers rated by A.M. Best are expected to have adequate reinsurance protection, with deductibles that are small percentages of their premium base and capital sizes.
A.M. Best will continue to closely monitor developments at its rated insurers as more information becomes available on the ultimate gross and net impact of the floods on their profitability.
Source : Asia Insurance Review

Insurers confused about what constitutes mental illness

Nov 01, 2018

Insurers in India are at different stages in their preparations to provide coverage to those who are mentally ill.

One of the reasons for this situation is confusion among insurers over the definition of the term “mental illness” in the Mental Healthcare Act 2017, which became effective in May 2018.

Mr Mayank Bathwal, CEO of Aditya Birla Health Insurance Company (ABHIC) told Firstpost that it is easier to chalk out policies for in-patient facilities (which include hospitalisation) because of already available data and existing clarity on benefits for customers; but for mental health care, there is work that needs to be done in terms of understanding the range of issues or the benefits that insurers need to provide.

“We are now reviewing the process. Mental health is a fairly vast area,” he said.

Mr Bathwalsaid that ABHIC is looking at how to provide mental healthcare benefits and is in touch with the IRDAI to seek clarification wherever required. "We will offer these benefits at the right time,” he said.

He added, “We also need to be very clear about what mental health is. Our products already cover some of these lifestyle conditions, and when our health coaches have interactions with our customers, the top areas they talk about is how to deal with stress, etc. So, in some sense, we’re already providing some of these benefits and we’re doing some of these interactions with our existing customers. How you take it forward in terms of OPD expenses or hospitalisation expenses are areas that will evolve.”

ICICI Lombard, on the other hand, is ready to cover mental illness in line with an IRDAI's directive. In an emailed response, Mr Sanjay Datta, chief–underwriting, claims, reinsurance and actuarial, at ICICI Lombard, said, “Our existing policy will cover mental illness in the same manner as physical illness as per policy terms and conditions.”

Mr Ashish Mehrotra, MD & CEO of Max Bupa Health Insurance, in an article in Financial Express, pointed out that the National Mental Health Survey 2016 estimated that about 150m adult Indians, or 15% of India’s population suffered from mental health problems. Those between 30-49—a productive age group in the workforce—were among the most affected.
“Without the availability of insurance, patients have had to cover the entire cost of treatment out of pocket. This has proved a major deterrent, due to which an estimated 80% of patients do not seek or receive any treatment,” Mr Mehrotra said.

Immediate effect

Following the passage of the Mental Healthcare Act 2017 in May 2018, the IRDAI issued a circular in August directing health insurance providers to cover mental health problems as part of their policies with immediate effect. At that time, there was not a single policy in the market which covered mental healthcare.

Mr Bathwal said, ”While the policies, document, terms and conditions have not changed yet—because they have to be filed with the regulator— the circular meant that insurers, despite not having made changes to terms and conditions, will have to start offering those benefits. All these insurers have to go back and refile their terms and conditions because the document which is currently written for most of them will have a clause which says that anything to do with schizophrenia, Alzheimer’s are excluded. Technically, they’ll have to erase this sentence. That has not happened because it’s a long drawn process. Most insurers are in that process.”

While the Act implies that everybody is deemed covered for mental health problems, how the insurers cover their customers also depends on how they interpret the IRDAI circular.

Mr Vaidyanathan Ramani, product and innovation head at Policybazaar.com, said, “Different insurers can interpret it in different ways. For example, today, there are health insurance policies which cover you typically only if you’ve been admitted to hospital for more than 24 hours. If you have not, then there are special lists under which the coverage is allowed, like daycare procedures. One quick interpretation of the IRDAI circular is that an insurer will also cover mental health insurance the same way."

Mr Ramani’s understanding is that there is an informal committee constituted by insurance companies which is looking into defining mental illness and standardising the procedures.

Insurers and the IRDAI have a lot of ground to cover, including deciding on procedures to be followed, terms and conditions in insurance policies, evaluation parameters to be used to screen patients, and the premium at which mental healthcare can be covered.

Source: Asia Insurance Review

How to address the limitations of health insurance

Oct 31, 2018

A core principle, that I have been taught, in building a career is to always provide solutions when asked a question. Many years ago, in my first job at an FMCG company, my boss and I would travel into the interiors of Andhra Pradesh where he would ask me about the crops on the roadside, harvesting cycles, Telegu signposts, and erratic sales. I answered all his questions confidently, safe in the knowledge that neither of us knew the answers. Over the years, I like to believe, my solutions have become more fact based.

Two incidents last week reminded me that I do not always have all the answers and, my field of work, insurance has considerable limitations. I was invited to a panel discussion on mental health and insurance. The audience consisted mostly of caregivers and some suffering from mental illnesses. The panellists were from insurance, NGOs and the medical profession. The most poignant question was from an 80-year-old, ram-rod straight gentleman who said that he had taken care of his schizophrenic daughter all his life but “is there an insurance that can take care of her after I die?” We, the panellists, spoke about risk, underwriting and products but the plain fact is that insurance cannot help in this situation.

The second incident concerns a migrant family that I have known for a few years. A member of the family developed high fever and we directed him to a private hospital. Since hospitalisation costs were high, about ₹30,000, he went to a nearby secondary-care government hospital where no beds were available, and so was redirected to a premier tertiary government hospital. Here, he was admitted but had to sleep on the hospital floor, for lack of space. After a day, worried about the poor hygiene, he decided to return home, suffered a relapse and died a few days later.

There are many situations, such as these two, where insurance cannot help. If you are already ill, for example. People suffering from illness are the most eager to buy health insurance. But, for most, it is already too late. If you have had a disease that impacts one of the core body systems—cardiac, endocrine, mental health, neurological, renal, among others—then it is difficult to buy any insurance at all. For people suffering from mental ill-health, the issue is not so much that mental illness costs cannot be covered but more that even their physical ailments are not insurable. You have to buy health insurance when you are well and do not need it.

Similarly, insurance is ineffective if the main costs are for out-patient medicines, diagnostic tests or home care. In mental illnesses, the caregiver’s time is most expensive. In diseases such as stroke, where hospitalisation may not be extensive, the primary cost is an inability to work. Traditional mediclaim does not pay these costs. Some newer products can help but in a limited way.

Over the years, critical illness plans have steadily improved and now include diseases that do not require hospitalisation, such as stroke, Alzheimer’s or Parkinson. This insurance pays a fixed benefit not linked to actual medical costs.

Insurance does not help in cases that require long-term care. The commonest afflictions of the elderly require high-quality home care for life. Nurses or paramedics may be needed on call. In many situations, assisted living is required. These costs are hard to insure. In some international markets, long-term care insurance has been introduced, rather unsuccessfully, because care costs are extremely high.

Insurance is not a substitute for building quality medical capacity. For the migrant that died, the issue was that both the private and government hospitals failed to give him basic care in a hygienic or affordable manner.

Understanding these limitations is the starting point of finding meaningful solutions. From an insurance standpoint, we must build scale and acquire better morbidity data. Scale allows insurers to insure riskier lives and diseases. The costs of a few ill patients are spread over a larger base and this allows the business be sustainable. Group health insurance, that companies or communities can buy, covers many lives in one go and is able to insure people that are uninsurable in individual insurances. The information on morbidity is basic. Illness rates are not easily available.

Doctors and insurers, always at loggerheads, must be brought together in a meaningful way for effective solutions. Perhaps then insurance can break out of some of its limitations.

Source: LiveMint.com

Majority of Indian firms have cybersecurity insurance: Report

Oct 30, 2018

About eight out of ten Indian firms surveyed had insurance to protect against cyber threats, with Indian telecom companies being the best prepared. About 60% of Indian telcos reported comprehensive cyber security insurance.

“India has a well-developed IT sector and is on the front-foot with this issue. The data breaches in India in the past 12 months have continued to have an impact on local businesses, so there is recogniti on that insurance plays an important role in risk mitigation and is an important consideration to minimizing disruption,” Vishal Goyal, country manager for India at FICO said in a statement.

The survey, which was conducted by research firm Ovum, was of 500 Indian companies and companies in ten other countries.

Given the amount of insurance reported in India, the country is second only to the United Kingdom in companies having cyber threat insurance.

As insurance claims from the devastation of life and property in Kerala floods touch Rs 2,000 crore, the claims payouts are likely to impacted public sector insurers more than private sector ones, according to industry sources.

Experts attribute the hit to higher exposure. “Public sector general insurers had a higher exposure (than private peers) to Kerala and Karnataka. Hence, the impact of the claims will be seen in our underwriting performance. This will directly impact the bottom line,” said a senior claims executive of a state-owned insurer.

Out of the Rs 2,000 crore gross insurance claims, it is estimated that majority have been from the motor insurance segment since several cars/bikes were submerged in water for several days after incessant rains lashed the state in July and August.

When the claims paid are higher than the premiums collected, a general insurer faces an underwriting loss.

Among the private sector insurers who have announced their financial results for the second quarter, ICICI Lombard General Insurance in its analyst call said that they faced a net impact of Rs 25 crore from the Kerala floods.

“The company’s losses are much lower than its natural market share and our share of the Kerala losses is 3.3 percent of that of the industry,” said Bhargav Dasgupta, MD and CEO, ICICI Lombard, in a post-earnings analyst call.

Meanwhile, Bajaj Allianz General Insurance took a hit of Rs 62.9 crore from the Kerala floods.

Most insurers had taken reinsurance support for the business written, meaning that they had taken a risk cover to protect against large financial losses.

Currently, insurance companies are in the process of settling the Kerala flood claims. The regulator has asked insurers to simplify the claims settlement process for the state.

While almost 500 deaths are estimated to have occurred in the floods, few had a life insurance policy. Hence, death claims have been low.

Past catastrophes and insurance losses

In November 2015, Chennai and adjoining areas were hit by heavy rains and flash floods. About Rs 5,000 crore worth of insurance claims were filed for death, property and vehicle damage. Even here, public sector insurers like United India Insurance were the worst hit.

In the last five years, natural catastrophes have led to insured losses of almost Rs 20,000 crore for companies. Some of the large catastrophic events include the 2013 Uttarakhand floods and Cyclone Phailin in 2014, Chennai floods and the recent floods in Kerala and Nagaland.

According to a Swiss Re report, the total insured losses from natural catastrophes and large man-made disasters were $144 billion in 2017. An active hurricane season in the North Atlantic, and a series of wildfire, thunderstorm and severe precipitation events across different regions pushed global catastrophe claims to their highest level ever recorded in a single year.

The total economic losses were $337 billion, making an all-peril global catastrophe protection gap of $193 billion in 2017. Globally, more than 11,000 people lost their lives or went missing in disasters, while millions were left homeless.

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